Rudd Company has budgeted the following sales revenue for the next four months: - February: $300,000 - March: $240,000 - April: $210,000 - May: $330,000 Past experience indicates that 80% of sales each month are on credit, and from these credit sales: - 60% are collected in the same month as the sale - 35% are collected in the following month - 3% are collected in the second month after the sale - 2% are uncollectible. Based on this information, here's the expected cash receipts from sales for the month of May: 1. Cash receipts from May sales (60% of credit sales and 100% of cash sales): - Total May sales: $330,000 - Credit sales (80% of May sales): $330,000 * 80% = $264,000 - Cash sales (remaining 20% of May sales): $330,000 * 20% = $66,000 - Collections within same month (60% of May credit sales): $264,000 * 60% = $158,400 - Total cash collections from May sales: $158,400 + $66,000 = $224,400 2. Cash receipts from April credit sales (35% collected in May): - April credit sales (80% of April's $210,000): $210,000 * 80% = $168,000 - Collections in May (35% of April credit sales): $168,000 * 35% = $58,800 3. Cash receipts from March credit sales (3% collected in May): - March credit sales (80% of March's $240,000): $240,000 * 80% = $192,000 - Collections in May (3% of March credit sales): $192,000 * 3% = $5,760 Total expected cash receipts for May: - From May sales: $224,400 - From April sales: $58,800 - From March sales: $5,760 Total = $224,400 + $58,800 + $5,760 = $288,960 Therefore, the schedule of expected cash receipts from sales for the month of May is $288,960.

Question

Rudd Company has budgeted the following sales revenue for the next four months: - February: $300,000 - March: $240,000 - April: $210,000 - May: $330,000 Past experience indicates that 80% of sales each month are on credit, and from these credit sales: - 60% are collected in the same month as the sale - 35% are collected in the following month - 3% are collected in the second month after the sale - 2% are uncollectible. Based on this information, here's the expected cash receipts from sales for the month of May: 1. Cash receipts from May sales (60% of credit sales and 100% of cash sales): - Total May sales: $330,000 - Credit sales (80% of May sales): $330,000 * 80% = $264,000 - Cash sales (remaining 20% of May sales): $330,000 * 20% = $66,000 - Collections within same month (60% of May credit sales): $264,000 * 60% = $158,400 - Total cash collections from May sales: $158,400 + $66,000 = $224,400 2. Cash receipts from April credit sales (35% collected in May): - April credit sales (80% of April's $210,000): $210,000 * 80% = $168,000 - Collections in May (35% of April credit sales): $168,000 * 35% = $58,800 3. Cash receipts from March credit sales (3% collected in May): - March credit sales (80% of March's $240,000): $240,000 * 80% = $192,000 - Collections in May (3% of March credit sales): $192,000 * 3% = $5,760 Total expected cash receipts for May: - From May sales: $224,400 - From April sales: $58,800 - From March sales: $5,760 Total = $224,400 + $58,800 + $5,760 = $288,960 Therefore, the schedule of expected cash receipts from sales for the month of May is $288,960.

Business · College · Thu Feb 04 2021

llm

Answered on Mon Nov 20 2023

To calculate the expected cash receipts from sales for the month of May, we need to determine the cash that will be collected based on the past sales, following the collection pattern that Rudd Company has experienced. Here's how you can break it down:

1. February sales that will be collected in May: Credit sales: $300,000 * 80% = $240,000 (since 80% sales are on credit) Collection in the second month following the sale (April): $240,000 * 3% = $7,200

2. March sales that will be collected in May: Credit sales: $240,000 * 80% = $192,000 Collection in the month following the sale: $192,000 * 35% = $67,200

3. April sales that will be collected in May: Credit sales: $210,000 * 80% = $168,000 Collection in the month of sale: $168,000 * 60% = $100,800

4. May sales that will be collected in May: Since we are looking at the same month, we only count cash sales (which are 20% of the total, since 80% are on credit). Cash sales in May: $330,000 * 20% = $66,000

Finally, to find the total cash receipts for May, we sum the collections from February, March, April, and May cash sales:

May collections for February Credit Sales: $7,200 May collections for March Credit Sales: $67,200 May collections for April Credit Sales: $100,800 May Cash Sales: $66,000 Total cash receipts for May: $7,200 + $67,200 + $100,800 + $66,000 = $241,200

So, the expected cash receipts from sales for the month of May are $241,200.

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